Marriott International’s recent purchase of Starwood Hotels & Resorts Worldwide was the biggest hospitality industry announcement this year. The merger has created the largest hotel chain in the world by far. Starwood had been looking around for a buyer from as far back as April 2015, but it was only after several false starts and speculation that Hyatt Hotels was in the race, that Marriott emerged as the final winner.
The deal, which is expected to close mid-2016 is worth $12.2 billion of which $11.9 billion will be Marriott International stock. Once the deal is done, Marriott will have 5,500 hotels across categories in more than 100 countries, 1.1 million rooms and a combined loyalty club membership of 75 million (54 million from the Marriott Rewards and 21 million from Starwood Preferred Guest programmes).
Industry insiders are saying that the deal is a great buy for Marriott since they are buying Starwood shares for $72, compared to $90, which is where the Starwood scrip was in April when the chain first announced it was looking for a buyer.
Arne M. Sorenson, according to a media release issued to announce the deal, will remain president and CEO of Marriott International. Marriott’s board of directors following the closing of the deal will increase from 11 to 14 members with the expected addition of three members of the Starwood board. “When we looked at the industry going forward, we think that size matters. And when we had the opportunity at Starwood to combine with Marriott … to be the biggest hotel company in the world by a wide margin, we knew that strategically this was a great fit. The industrial logic is superb,” Adam Aron of Starwood, who will stay on as the interim CEO, said. “We think it’s a tremendous deal because we can pull these two companies together. We can obviously get cross synergies; that will be the easy part,” he said.
The two companies will remain independent until the official merger in mid-2016. As far as South Asia plans go, Starwood managing director (India) and regional vice-president (South Asia) Dilip Puri told BW Businessworld that the group was on track with its plan to add 47 new hotels to its existing inventory of 54 over the next three years. Marriott announced it will get 80 operating hotels in South Asia, up from its current 28 in the same time frame.
There is another angle too. Ever since the deal was announced there has been a dip in the share price of both chains. Some analysts are saying the market is viewing the deal as good for investors, but possibly bad for consumers, as it might lead to an end of the golden age of cheap travel for consumers.
(This story was published in BW | Businessworld Issue Dated 14-12-2015)